WEBVTT - How Sinclair Broadcasting Is Delivering Trump's Message 0:00:05.800 --> 0:00:08.360 Welcome to the Bloomberg p m L Podcast. I'm Pim 0:00:08.400 --> 0:00:11.440 Fox along with my co host Lisa Bramowitz. Each day 0:00:11.480 --> 0:00:15.000 we bring you the most important, noteworthy, and useful interviews 0:00:15.040 --> 0:00:17.520 for you and your money, whether you're at the grocery 0:00:17.560 --> 0:00:20.560 store or the trading floor. Find the Bloomberg p m 0:00:20.680 --> 0:00:32.240 L Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Well, 0:00:32.240 --> 0:00:36.040 the Sinclair Broadcast Group is not very well known, but 0:00:36.120 --> 0:00:39.680 it has one hundreds and seventy three broadcast TV stations, 0:00:39.920 --> 0:00:43.040 mostly in small markets like Sioux City, uh fres No, 0:00:43.440 --> 0:00:46.640 Little Rock, some bigger ones Pittsburgh, Salt Lake City in Washington, 0:00:47.080 --> 0:00:52.519 but they have increasingly taken a rather conservative band, Felix 0:00:52.560 --> 0:00:55.960 to let Bloomberg Business Week Reporter wrote a story about 0:00:56.000 --> 0:00:59.400 this that was truly fastening and Felix, first, can you 0:00:59.440 --> 0:01:03.880 just start with how you came to even write about this? Yeah, Well, 0:01:03.920 --> 0:01:06.240 it's one of those fascinating companies that kind of flies 0:01:06.319 --> 0:01:09.360 under the radar. Um. The way I got interested is 0:01:09.440 --> 0:01:13.120 when they announced their four billion dollar acquisition of Tribune 0:01:13.160 --> 0:01:15.920 Media in May, and I was sitting around with a 0:01:15.920 --> 0:01:17.760 couple of my colleagues and we're like, how come we 0:01:17.800 --> 0:01:19.960 don't know much about Sinclair or who runs that are 0:01:19.959 --> 0:01:22.160 what the culture of the company is like. And for 0:01:22.240 --> 0:01:27.200 a very important and influential media company, UM, they managed 0:01:27.240 --> 0:01:29.120 to really keep their name out of the news as 0:01:29.160 --> 0:01:32.480 much as possible. Tell us about David Smith. He's the 0:01:32.600 --> 0:01:36.760 chairman of the company. Him and his three brothers inherited 0:01:36.800 --> 0:01:40.520 the company from their father, Julian back in the who 0:01:40.560 --> 0:01:42.760 started the company originally in nineteen seventies. And for the 0:01:42.800 --> 0:01:44.959 first you know, a couple of decades of the company, 0:01:45.360 --> 0:01:47.960 it was a really small regional business. And then the 0:01:48.080 --> 0:01:52.040 nineties David Smith really started going out and acquiring other stations, 0:01:52.400 --> 0:01:55.720 and they've been the most aggressive acquirer of broadcast TV 0:01:55.840 --> 0:01:58.160 stations to the point where now they're not only the 0:01:58.200 --> 0:02:02.040 largest station already station group already, but now, uh, you know, 0:02:02.080 --> 0:02:05.120 with the acquisition of a media they're going to be 0:02:05.160 --> 0:02:09.440 by far in a way, the largest broadcaster in the country. 0:02:09.520 --> 0:02:12.760 How did they get around anti trust rules in SEC regulations. Well, 0:02:12.760 --> 0:02:16.200 it's amazing because you know, David Smith uh and his 0:02:16.320 --> 0:02:21.320 brothers are all big supporters of Republican politicians and conservative causes. Uh. 0:02:21.400 --> 0:02:24.480 If Hillary Clinton had won the election, there's no way 0:02:24.560 --> 0:02:27.800 this Tribune Media deal would have gone through the FCC, 0:02:28.760 --> 0:02:31.200 H would not have allowed it. And basically what happened 0:02:31.280 --> 0:02:34.639 is when Trump won his nomination to run the FCC, 0:02:35.520 --> 0:02:39.119 pretty soon after taking over, changed a rule that limited 0:02:39.800 --> 0:02:43.080 ownership of local media companies. And as soon as that 0:02:43.200 --> 0:02:47.720 rule was changed and this arcane rule was re emplaced, UM, 0:02:48.040 --> 0:02:52.640 then that allowed UH Sinclair to buy Tribune Media and 0:02:52.760 --> 0:02:57.040 it's the biggest acquisition the company's history. Felix described for 0:02:57.200 --> 0:03:00.840 people how the television business works when you own a 0:03:00.960 --> 0:03:04.400 station and are an affiliate of a network, and then 0:03:04.440 --> 0:03:09.320 your ability to insert local programming. Yeah, well, you know, basically, 0:03:09.520 --> 0:03:14.400 the station owner UM, even though the branding is from 0:03:14.480 --> 0:03:19.720 the network like ABC, NBC, Fox, CW, the station group 0:03:19.760 --> 0:03:23.320 that owns the station, like Sinclair, has a lot of 0:03:23.440 --> 0:03:27.000 influence and sway over the newsroom, which is really what 0:03:27.200 --> 0:03:31.280 creates the programming. So the local you know, your morning news, 0:03:31.320 --> 0:03:34.920 your evening news, your local nightly news, all of that 0:03:35.080 --> 0:03:38.480 is controlled by a station group that you know, the 0:03:38.640 --> 0:03:41.040 reports of the station group. And so what's amazing about 0:03:41.080 --> 0:03:47.400 Sinclair's They've really pioneered this method of injecting essentially centralized 0:03:47.440 --> 0:03:52.920 conservative political punditry into all of these small stations around 0:03:52.960 --> 0:03:58.480 the country. So does Sinclair have any direct relationship with 0:03:58.800 --> 0:04:02.200 President Trump and some of his cohorts like uh Steve 0:04:02.240 --> 0:04:04.760 Bannon and others. Or is it just sort of a 0:04:04.760 --> 0:04:08.880 tangential relationship based on the ties of the founders of Sinclair. Uh. 0:04:09.000 --> 0:04:11.360 You know, Initially during the start of the two thousand 0:04:11.360 --> 0:04:15.560 and sixteen presidential campaign, they threw their support behind UM 0:04:15.600 --> 0:04:19.240 Ben Carson, who, like David Smith and his brothers UH, 0:04:19.320 --> 0:04:23.120 is from the Baltimore area. UM. But once Ben Carson 0:04:23.160 --> 0:04:26.760 dropped out, they really threw their support behind Trump. They 0:04:26.800 --> 0:04:30.599 did a lot of you know, these centralized news stories 0:04:30.640 --> 0:04:34.880 that's were sent out to the station's criticizing Hillary Clinton. Uh. 0:04:34.920 --> 0:04:38.159 They've broke her to deal with Trump and his campaign 0:04:38.480 --> 0:04:41.000 to get more access for the reporters in exchange for 0:04:41.120 --> 0:04:45.440 not really criticizing uh those interviews at all and running 0:04:45.440 --> 0:04:48.880 them in full. And yeah, they've basically worked pretty hard 0:04:48.960 --> 0:04:53.520 to UM to align themselves with Trump. UM. Most recently 0:04:53.640 --> 0:04:57.280 and probably most importantly, they hired Boris Epstein, who was 0:04:57.480 --> 0:05:00.200 a uh, you know, an aid to the president, one 0:05:00.240 --> 0:05:03.880 of his real surrogates on TV. Throughout the campaign, they 0:05:03.960 --> 0:05:07.080 hired Boers After a brief stint in the White House, 0:05:07.080 --> 0:05:09.560 they hired him to be their chief political analyst and 0:05:09.640 --> 0:05:13.679 he now does you know, three uh segments a week, 0:05:14.600 --> 0:05:17.359 many of which is echo White hot House talking points, 0:05:17.640 --> 0:05:19.719 and each of those segments is then sent out to 0:05:20.040 --> 0:05:23.159 every single newsroom around the country that they're called what 0:05:23.240 --> 0:05:26.160 in the in the terms, they're called must runs and 0:05:26.279 --> 0:05:28.359 even the year. And this creates a lot of tension 0:05:28.360 --> 0:05:31.520 at the stations, particularly in big areas. Um, you know, 0:05:31.680 --> 0:05:34.599 they've had a lot of friction with for instance, Como TV, 0:05:34.800 --> 0:05:38.039 which is the station that they bought in Seattle area. 0:05:38.040 --> 0:05:41.920 It's a very progressive city. It's a liberal viewership. And 0:05:42.080 --> 0:05:44.200 when you talk to the people at these stations, they 0:05:44.200 --> 0:05:46.800 think this is crazy. We're doing our local newscast and 0:05:46.839 --> 0:05:48.880 all of a sudden we have to cut, you know, 0:05:48.960 --> 0:05:50.839 two minutes out of the evening news to go to 0:05:50.920 --> 0:05:54.279 this you know, former Trump spokesperson to do a segment 0:05:54.320 --> 0:05:57.640 about how great Trump is. Of course, it only matters 0:05:57.640 --> 0:06:00.240 if people watch, and real quick are people watch ching 0:06:00.920 --> 0:06:05.000 is listener? Is viewership going up? They have a big 0:06:05.040 --> 0:06:07.920 aggregate audience. I don't think the audiences are going up. 0:06:07.960 --> 0:06:11.039 And typically they don't even really with their stations in 0:06:11.080 --> 0:06:14.320 these markets. They don't really try and have the top 0:06:14.400 --> 0:06:18.479 station ratings wise. Uh, they usually just um, you know, 0:06:18.800 --> 0:06:21.880 buy more stations in the market. Well, it hasn't helped 0:06:21.880 --> 0:06:24.320 the stock stocks up four percent so far this year. 0:06:24.400 --> 0:06:27.880 Thanks very much, Felix Gillette. Great story. I encourage everyone 0:06:27.920 --> 0:06:43.120 to read about the Sinclair Bard Broadcasting Well. I am 0:06:43.240 --> 0:06:46.560 very pleased to welcome Cord Christensen. He is co founder, 0:06:46.880 --> 0:06:50.720 chief executive officer, and chairman of pet i q, the Boise, 0:06:50.880 --> 0:06:56.279 Idaho based company that just distributes pet supplies and adjusted 0:06:56.360 --> 0:06:59.159 it's I p O. It shares her up more than 0:06:59.360 --> 0:07:04.120 four sent on its first day of trading. Cord, congratulations 0:07:04.240 --> 0:07:06.599 on the successful I p O. I wanted just to 0:07:06.600 --> 0:07:08.800 get a sense of from you, first of all, before 0:07:08.839 --> 0:07:12.440 we get into the actual financing, about pet i Q 0:07:12.920 --> 0:07:16.240 and what the business model is and what the growth 0:07:16.240 --> 0:07:20.520 potential is at this point that you see, yes, thank you, 0:07:20.800 --> 0:07:23.240 we uh care a. Pet i Q are very focused 0:07:23.240 --> 0:07:26.720 on one thing, and that is providing better availability of 0:07:26.760 --> 0:07:29.920 the best pet healthcare items and by making those available 0:07:29.920 --> 0:07:34.680 through major retailers across the United States, and the company 0:07:34.680 --> 0:07:37.800 founded day one with that focus. We've never changed that 0:07:37.880 --> 0:07:41.400 focus and ultimately it's a very large market that's growing 0:07:41.440 --> 0:07:46.080 extremely well already. But there's a significant number of pets 0:07:46.080 --> 0:07:48.320 out there in the country that do not get great healthcare, 0:07:48.400 --> 0:07:51.360 and we think because all pets end up buying their 0:07:51.360 --> 0:07:54.080 products through our customers, we have the best opportunity to 0:07:54.120 --> 0:07:57.760 help educate consumers, bring in those those consumers that are 0:07:58.280 --> 0:08:01.080 not providing that, and ultimately grow the market significantly for 0:08:01.120 --> 0:08:03.280 all people that participate in it. We think it's great 0:08:03.320 --> 0:08:08.200 for our supplier partners, for the company as shareholders, unnultimately 0:08:08.280 --> 0:08:11.920 for consumers and their pet owners. Is is this gonna 0:08:12.000 --> 0:08:16.120 be a shot at veterinary offices, because isn't that where 0:08:16.200 --> 0:08:22.440 most people are most medication for pets is currently purchased. Yeah, 0:08:22.440 --> 0:08:24.840 we sure hope not. We built the company hoping that 0:08:24.840 --> 0:08:27.360 we would grow the total market and help everybody be 0:08:27.440 --> 0:08:30.080 successful in it, and we've seen we've been in business 0:08:30.120 --> 0:08:32.920 now since two thousand and nine, and as a company 0:08:32.960 --> 0:08:35.480 as we've grown there definitely was early days. I think 0:08:35.520 --> 0:08:37.480 some people that had the fear of the unknown and 0:08:38.000 --> 0:08:39.760 definitely thought that could be the case. But what we've 0:08:39.760 --> 0:08:42.720 seen is the market's growing and we're definitely seeing those 0:08:42.720 --> 0:08:45.600 new pets coming into it, and the veterinarians have grown 0:08:46.160 --> 0:08:48.400 both the visits and the product business that they have 0:08:48.480 --> 0:08:50.679 in their clinics every single year we've been in business, 0:08:50.679 --> 0:08:53.560 and we hope to continue to drive this success in 0:08:53.600 --> 0:08:57.040 the veterinarian's office. We view them absolutely the critical part 0:08:57.040 --> 0:08:59.520 of the partnership here at pet i Q and want 0:08:59.559 --> 0:09:01.800 to support at them enory and every way we can. Okay, 0:09:01.840 --> 0:09:03.839 I got that. But you know you've got three main 0:09:03.880 --> 0:09:06.880 categories of business, right, I mean you've got the prescription medication, 0:09:06.920 --> 0:09:09.280 You've got the over counter medication, and then the health 0:09:09.320 --> 0:09:14.000 and wellness products. Correct, That is correct? Okay, So I'm 0:09:14.000 --> 0:09:16.839 looking at, let's say, the prescription medication. I mean, I 0:09:16.920 --> 0:09:19.080 got to think that if it's less expensive at you know, 0:09:19.120 --> 0:09:22.920 Walmart or pet Smarter or Kroger or whatever, that that's 0:09:22.920 --> 0:09:26.040 where people are going to go, as opposed to just saying, okay, 0:09:26.040 --> 0:09:29.680 give me whatever you prescribed and I'll pay for it. Yeah. 0:09:29.720 --> 0:09:32.080 I think that definitely could be the first perception. There's 0:09:32.080 --> 0:09:33.760 definitely going to be some people that say they're going 0:09:33.800 --> 0:09:35.880 to go there and buy their pet prescriptions where they 0:09:35.880 --> 0:09:39.400 buy their human prescriptions. But there's been access to pet 0:09:39.400 --> 0:09:42.600 prescriptions outside of the veterinarian market for a very long time. 0:09:42.720 --> 0:09:45.040 You have great companies like One Pet Meds that have 0:09:45.120 --> 0:09:47.840 been selling in that manner for a very long time 0:09:47.920 --> 0:09:51.160 with with pricing that's been very very established to be 0:09:51.200 --> 0:09:54.280 a saving So we think we can peacefully coexist. We 0:09:54.320 --> 0:09:57.360 think we can drive a lot more people into the 0:09:57.400 --> 0:10:01.040 space and and ultimately the veterinarians will gets the first meeting, 0:10:01.160 --> 0:10:02.920 they get the opportunity to be with the patient first, 0:10:02.960 --> 0:10:05.520 and that patient has the opportunity to buy their products there. 0:10:05.559 --> 0:10:08.800 So more times than not they'll choose to buy at 0:10:08.800 --> 0:10:11.200 the veterinarian But there will be those that want to 0:10:11.200 --> 0:10:13.120 come and get their pet prescriptions and they're over the 0:10:13.200 --> 0:10:15.960 counter medications to our customers, and we view it as 0:10:15.960 --> 0:10:19.720 a very creative opportunity for everybody that's in the industry. Court. 0:10:19.800 --> 0:10:21.720 You know, we had a guest on a couple of 0:10:21.720 --> 0:10:24.079 weeks ago who is saying that there have been studies 0:10:24.120 --> 0:10:26.559 done that show that people love their pets more than 0:10:26.600 --> 0:10:29.640 their children. Uh. You know, I have to wonder, just 0:10:30.120 --> 0:10:34.480 in light of the increasing love and emphasis on pets, 0:10:34.679 --> 0:10:39.360 whether the entire amount of spending that people uh have 0:10:39.600 --> 0:10:43.400 every year on their pet healthcare, whether that's rising at 0:10:43.400 --> 0:10:45.160 an exponential price. Can you can you give us a 0:10:45.200 --> 0:10:48.520 sense of that? Yeah? I think um I mentioned it 0:10:48.800 --> 0:10:50.600 a number of times throughout my career, but it's been 0:10:50.640 --> 0:10:52.680 really interesting. For two years on a row now there's 0:10:52.720 --> 0:10:56.160 been more pets brought home to US households than actually babies. 0:10:56.920 --> 0:10:58.360 And so if you just think of the trend as 0:10:58.360 --> 0:11:00.959 that continues to compound, as those pets year over year 0:11:01.000 --> 0:11:03.360 do that we're going to see. Well, I'm just like 0:11:03.400 --> 0:11:05.520 trying to comprehend that the past two years there have 0:11:05.559 --> 0:11:08.920 been more pets brought home than babies in the US 0:11:08.960 --> 0:11:10.920 for the first time in our history of our country. 0:11:10.960 --> 0:11:12.960 Two years in a row. Oh my gosh, Okay, quite 0:11:13.000 --> 0:11:16.440 sorry now, And so I think it's it's very obvious 0:11:16.440 --> 0:11:18.839 that with all the new you know, really pet parents. 0:11:18.920 --> 0:11:20.839 I think we can truly call them pet parents at 0:11:20.840 --> 0:11:23.080 this point when you start seeing those kind of trends 0:11:23.120 --> 0:11:25.720 and those kind of things going on our country. We 0:11:25.800 --> 0:11:29.960 have a customer base that ultimately has a dent of 0:11:30.040 --> 0:11:33.560 the pets in this country go to major retail outlets 0:11:33.559 --> 0:11:37.240 and online stores to find their pet supplies. We're at 0:11:37.240 --> 0:11:40.240 the front and in the very very beginning helping educate 0:11:40.280 --> 0:11:43.400 them on where they can get quality healthcare. And then remember, 0:11:43.440 --> 0:11:45.240 every single person that's going to come back and buy 0:11:45.240 --> 0:11:48.559 a prescription drug at a retailer first is going to 0:11:48.640 --> 0:11:51.600 go to a veterinarian's office and have that visit. And 0:11:51.640 --> 0:11:54.559 so again, we think we're very balanced in providing incremental 0:11:54.600 --> 0:11:58.680 growth for the manufacturers in that space, for the veterinarians, 0:11:58.760 --> 0:12:01.000 and ultimately just exp banning the pie and if there's 0:12:01.000 --> 0:12:03.400 more pets coming home than babies, we're in a very 0:12:03.440 --> 0:12:05.559 good tailwind as far as the market and the market 0:12:05.559 --> 0:12:08.360 that's already growing at a six percent KR. Who knows 0:12:08.360 --> 0:12:10.400 what the potential growth rate could be as we continue 0:12:10.400 --> 0:12:12.800 to drive that awareness. I think the estimate is for 0:12:12.840 --> 0:12:15.480 what about a nine billion dollar market that was in 0:12:15.480 --> 0:12:19.560 the SEC filing, a nine billion dollar market in for 0:12:19.960 --> 0:12:23.640 pet medications. Thanks very much for joining us. Cord Christensen 0:12:23.760 --> 0:12:26.120 is the co founder and the chief executive of pet 0:12:26.240 --> 0:12:29.880 i q UH. Their stock begins trading. It is trading 0:12:29.960 --> 0:12:32.560 right now on the New York Stock Exchange. Thanks very 0:12:32.600 --> 0:12:35.280 much for being with us. And just a note, uh, 0:12:35.440 --> 0:12:37.640 Lisa Bramwitz. You know one of the things that you 0:12:37.679 --> 0:12:39.600 mentioned having to do with the number of pets and 0:12:39.600 --> 0:12:42.600 so on. As part of their uh filing, they say 0:12:42.600 --> 0:12:45.960 about seventy of dog owners and seventy seven percent of 0:12:46.040 --> 0:12:50.280 cat owners view their pets as members of the family. Wow, well, 0:12:50.280 --> 0:12:52.800 those shares are trading on the NASDAC for I beg 0:12:52.840 --> 0:13:08.160 your pardon, Yes, yes, but yeah, it's just amazing. All right. Well, 0:13:08.200 --> 0:13:10.680 let's let's take a look at another story that caught 0:13:10.720 --> 0:13:13.000 our eye today. Y'alman owner and it is the author 0:13:13.000 --> 0:13:14.840 of it. He's a senior writer in banking and finance 0:13:14.920 --> 0:13:16.839 for Bloomberg News. And it was taken a look at 0:13:16.960 --> 0:13:20.320 the pretty incredible profits that we have seen at the 0:13:20.400 --> 0:13:25.079 biggest US banks despite these regulations that have sensibly been 0:13:25.240 --> 0:13:27.560 holding them back. Yellman, can you just give us a 0:13:27.559 --> 0:13:31.120 sense of how big these profits have been. Um, they're 0:13:31.160 --> 0:13:33.720 almost as big as they were in two thousand seven, 0:13:33.880 --> 0:13:36.480 which is pretty amazing because that was a good year 0:13:36.800 --> 0:13:39.839 before everything fell apart, as you remember, and it was 0:13:39.920 --> 0:13:42.040 less regulated. This is the crucial point, right because a 0:13:42.080 --> 0:13:45.200 lot of these Dodd Frank regulations had not yet been implemented. 0:13:45.240 --> 0:13:47.800 It was pretty much unregulated. You can say, I mean 0:13:47.920 --> 0:13:51.280 they they you know, um, they tried there were people 0:13:51.320 --> 0:13:53.480 who tried to regulate it. There with this market, they 0:13:53.480 --> 0:13:57.840 were told to be hands off. Um. Capital rules were revised, 0:13:57.880 --> 0:14:00.880 so basically banks could go on without any capital, meaning 0:14:00.880 --> 0:14:02.679 you don't really need that, could you just borrow as 0:14:02.760 --> 0:14:06.800 much as you can so um, So their leverage ratios 0:14:06.840 --> 0:14:11.160 reached you know, one to fifty at times. UM. So 0:14:11.440 --> 0:14:14.720 there was hardly in the regulation and they were they 0:14:14.720 --> 0:14:18.560 were making a lot of money and now there's all 0:14:18.600 --> 0:14:21.560 this regulation they're constantly complaining about and they're making about 0:14:21.600 --> 0:14:24.320 the same amount of money. So what does that tell 0:14:24.360 --> 0:14:29.520 you about their desire to have the chains of regulatory 0:14:29.560 --> 0:14:33.800 authority loosened? So I mean we have to so no 0:14:33.920 --> 0:14:37.000 put it in context, you know, as as the banker 0:14:37.360 --> 0:14:40.400 um that the bank lobbyist told me who's quoted in 0:14:40.440 --> 0:14:44.200 this story. Well, okay, but the GDP nominal terms is 0:14:44.200 --> 0:14:47.120 bigger than it was, so the number is not one 0:14:47.120 --> 0:14:50.600 to one comparison. We're basically got back to the records, 0:14:50.640 --> 0:14:53.280 but it's a bigger GDP. Typically, what happens with banks 0:14:53.640 --> 0:14:58.440 they're lending an activity goes up as GDP goes up nominally. 0:14:58.480 --> 0:15:03.040 So if GDP grows two percent nominally regardless of realists, 0:15:03.120 --> 0:15:06.920 real terms, everything in the bank's assets due too, but 0:15:07.040 --> 0:15:11.000 they haven't. So in a way, we're not where we 0:15:11.000 --> 0:15:14.160 were in two thousand seven, but we're getting very close. 0:15:14.360 --> 0:15:17.320 So we've heard a lot about how certain businesses have 0:15:17.400 --> 0:15:20.720 become less profitable, talking about debt trading in particular some 0:15:20.840 --> 0:15:24.440 of their prop trading books, as well as equity trading, 0:15:24.480 --> 0:15:28.200 which has been losing it's sort of revenue abilities for 0:15:28.240 --> 0:15:33.680 a while. So what's behind the growth in profits? Um? Well, 0:15:33.720 --> 0:15:36.960 I mean they have been lending on like so unlike, 0:15:37.080 --> 0:15:41.120 unlike the common misperception that they have been lending more 0:15:41.120 --> 0:15:45.200 and more. I mean, again you make comparisons to before 0:15:45.280 --> 0:15:49.800 the crisis, lending was growing faster, but then a lot 0:15:49.800 --> 0:15:52.160 of people will say, god, it was growing too fast, right, 0:15:52.160 --> 0:15:54.720 there were all the subprime stuff that everybody was borrowing. 0:15:54.760 --> 0:15:56.760 But but lending is not all the same, right. I mean, 0:15:56.800 --> 0:15:59.920 when you talk about lending and we're talking about revolving 0:16:00.120 --> 0:16:03.760 lines of credit and straight corporate loans or are these 0:16:03.840 --> 0:16:10.080 more complicated structures that could potentially have some serious problems 0:16:10.120 --> 0:16:12.480 that have sort of embedded leverage. I mean, are we 0:16:12.520 --> 0:16:16.040 talking about just the banks doing their function as basically 0:16:16.280 --> 0:16:19.000 going out there and providing capital to businesses of all 0:16:19.040 --> 0:16:22.400 sizes and letting them go out and create American dream. 0:16:22.880 --> 0:16:26.960 They are doing their function, the lending that's helped, and 0:16:27.000 --> 0:16:29.520 it's And this is interesting because although this is this 0:16:29.560 --> 0:16:31.440 is something we thought about, what didn't really including in 0:16:31.480 --> 0:16:34.720 the story. Um the spreads, I mean, the correct credit. 0:16:34.800 --> 0:16:37.720 The interest rates are so low, so to be able 0:16:37.760 --> 0:16:40.840 to actually make decent profits in an in such a 0:16:40.920 --> 0:16:45.640 horrible interest rate environment is pretty amazing too. But the 0:16:46.000 --> 0:16:48.760 if you look at net interest margin compared it with 0:16:48.960 --> 0:16:52.040 now and and pre crisis, the gap isn't that bad. 0:16:52.120 --> 0:16:55.600 So despite interest rates being so low, banks have managed 0:16:55.640 --> 0:17:00.240 to keep improved. Recently, they came down because nobody was 0:17:00.280 --> 0:17:03.800 borrowing for so for several years. Two thousand ten was 0:17:03.840 --> 0:17:07.600 really bottom. The interesting margins really went down because when 0:17:07.600 --> 0:17:10.359 there's no loan demand, you can't charge for it. You know, 0:17:10.359 --> 0:17:12.600 it doesn't want to what interest people. If there are 0:17:12.600 --> 0:17:14.720 people are in borrowing, you have to keep it low. 0:17:14.920 --> 0:17:18.080 But now there's demands more and more, the demand has 0:17:18.119 --> 0:17:21.199 picked up. People are borrowing, companies are borrowing, and the 0:17:21.240 --> 0:17:24.240 banks are now notching up that interest rate and they 0:17:24.240 --> 0:17:26.320 are able to make the spread that they used to 0:17:26.320 --> 0:17:29.679 make before the crisis, which is very healthy. So and 0:17:29.760 --> 0:17:33.359 trading has has bombed up to I mean this this 0:17:33.440 --> 0:17:35.760 quarter was not a great quarter. Clearly its second quarter. 0:17:35.840 --> 0:17:39.240 Everything went down because because everything is quiet. We don't 0:17:39.240 --> 0:17:42.280 like quiet. We want a lot of scare fear, Brexit 0:17:42.440 --> 0:17:44.719 and and and World War three. Now we don't want that. 0:17:44.880 --> 0:17:50.320 But but you know, trading force for several quarters really improved. 0:17:50.359 --> 0:17:53.000 I mean for some banks, five quarters in a row, 0:17:53.119 --> 0:17:57.280 they saw massive increases in trading. Morgan Salon was doing great. Um. 0:17:57.520 --> 0:18:00.960 You know, JP Morgan has just been grabbing market share. UM. 0:18:01.760 --> 0:18:04.720 US banks are doing great. European banks not so. But 0:18:04.840 --> 0:18:07.240 that helps the US banks. Yeah, I mean I wonder 0:18:07.280 --> 0:18:10.280 if you could just briefly just describe the banks paying 0:18:10.280 --> 0:18:13.720 out interest Let's say on CDs that you're not gonna 0:18:13.720 --> 0:18:16.320 get anything on in a CD. Right, we're talking maybe 0:18:16.359 --> 0:18:19.639 one percent at the current rate, not even one, not 0:18:19.800 --> 0:18:22.080 even one. Now. I mean I was looking at interest 0:18:22.200 --> 0:18:24.920 rates the banks paid the other day, and a chart, um, 0:18:25.000 --> 0:18:27.920 and what happened to them? U um, and there was 0:18:27.960 --> 0:18:30.920 a study. UM, I forget maybe fed or something over there, 0:18:30.920 --> 0:18:35.040 I see, But interest rates they pay their depositors is 0:18:35.600 --> 0:18:39.640 around zero. So that has been and it hasn't picked 0:18:39.720 --> 0:18:43.080 up even as the FED has picked up in its 0:18:43.119 --> 0:18:46.760 interest rate, right, So it's not even connected. That's because 0:18:47.280 --> 0:18:51.439 there's still no alternative. I mean, I talked about lending. 0:18:51.800 --> 0:18:54.560 When there's demand for borrowing, you can jack that up. 0:18:54.800 --> 0:18:57.440 But deposits, you need to jack up the deposit rate 0:18:57.720 --> 0:19:00.879 when you're competing with others. That is not there because 0:19:01.000 --> 0:19:03.880 money markets are no longer in the game, so they 0:19:03.880 --> 0:19:05.800 don't have to. They don't feel like they have dejected out. 0:19:05.800 --> 0:19:08.200 No pressure for that, No pressure, Thanks very much. Yeah, 0:19:08.200 --> 0:19:11.640 I'm an owner on as always senior writer banking and finance. 0:19:11.720 --> 0:19:27.800 Checkout history at Bloomberg dot com. Well, you know, the 0:19:27.840 --> 0:19:31.879 Trump administration as well as Bill Schuster, he is a 0:19:31.920 --> 0:19:36.320 congressman from Pennsylvania, are promoting the idea of turning the 0:19:36.359 --> 0:19:41.720 air traffic control system into a government well a government 0:19:41.800 --> 0:19:46.600 authorized private corporation that would be responsible for the air 0:19:46.640 --> 0:19:49.439 traffic control system in the United States. And here to 0:19:49.440 --> 0:19:52.080 tell us more about this topic on the airline industry 0:19:52.480 --> 0:19:55.240 is an expert Bob Crandall. He is the former chief 0:19:55.280 --> 0:19:58.840 executive of American Airlines and uh, I want to thank 0:19:58.840 --> 0:20:00.800 you very much. For joining us. R Crandel, thanks for 0:20:00.840 --> 0:20:03.239 being I'm glad to be here, all right. So, you know, 0:20:03.600 --> 0:20:05.600 I was going to give them your long history. You know, 0:20:05.640 --> 0:20:07.840 you worked at t w A, you were you know, 0:20:08.240 --> 0:20:11.000 American Airlines and so on. I wonder if you could 0:20:11.040 --> 0:20:14.280 just start off by framing the conversation about the government's 0:20:14.359 --> 0:20:18.399 participation in the airline industry, because we used to have 0:20:18.480 --> 0:20:22.840 a regulated airline industry and now we don't. Sort of, well, 0:20:22.840 --> 0:20:25.600 that's right. Then, we used to have regulated industry in 0:20:25.640 --> 0:20:28.720 the sense that the the c A B control where 0:20:28.760 --> 0:20:31.360 airlines could fly and how much they could charge. All 0:20:31.400 --> 0:20:35.800 that went away in uh. The f a A then 0:20:35.920 --> 0:20:40.960 has the task of establishing safety standards and at the 0:20:41.040 --> 0:20:44.960 same time as the task of physically operating the air 0:20:44.960 --> 0:20:48.600 traffic control system. And what this whole thing is about 0:20:48.800 --> 0:20:53.920 is that around the world more than fifty countries, almost 0:20:54.040 --> 0:20:57.639 every other advanced country, in particularly Canada just one north, 0:20:58.200 --> 0:21:01.840 have taken the actual opera ration of the system out 0:21:01.840 --> 0:21:04.199 of government and they have put it into what are 0:21:04.280 --> 0:21:10.159 called a nsps and navigation service providers, which support themselves 0:21:10.200 --> 0:21:15.040 by charging fees rather than supporting it with taxes as 0:21:15.080 --> 0:21:18.720 the United States does. It has proven to be a very, 0:21:18.880 --> 0:21:24.840 very beneficial change. Those systems are cheaper and they and 0:21:25.040 --> 0:21:27.760 most importantly, I think tim they make better use of 0:21:27.800 --> 0:21:31.320 the airspace, which is a limited asset. So this is 0:21:31.359 --> 0:21:34.800 something that has been under discussion in the United States 0:21:35.400 --> 0:21:39.320 since Bill Clinton's time. Al Gore was the first advocate 0:21:39.400 --> 0:21:42.919 of it, and in the meantime, virtually every other country 0:21:42.920 --> 0:21:44.760 has done it, and I hope we will soon get 0:21:44.760 --> 0:21:47.200 on and do it. All Right, So if we were 0:21:47.240 --> 0:21:51.960 to do that, the board that would oversee this new corporation, 0:21:52.600 --> 0:21:58.000 those members would be selected by the airlines. Correct, No, no, no, no, no, no, no, 0:21:58.040 --> 0:22:01.720 they wouldn't. In fact, uh, general aviation would have a seat, 0:22:01.800 --> 0:22:06.600 Airports would have a seat. Uh, the government would have that. 0:22:06.600 --> 0:22:09.359 The government would have a seat that the Controllers Union 0:22:09.400 --> 0:22:12.920 would have a seat. The in the board overall, there's 0:22:13.000 --> 0:22:16.560 only one of the only one seat is it would 0:22:16.560 --> 0:22:20.440 be the passenger airlliances, one for cargo airlines. There's one 0:22:20.440 --> 0:22:22.480 for charter Would they all have to be part of 0:22:22.800 --> 0:22:26.399 Airlines for America. That's the sort of umbrella group, right, No, no, 0:22:26.520 --> 0:22:29.560 the umbrella group is only the passenger airlines to him, 0:22:29.680 --> 0:22:35.399 So the Airlines for America and the airlines themselves was uh, 0:22:35.560 --> 0:22:38.000 get one seat on this board and everybody else gets 0:22:38.000 --> 0:22:40.920 the seat as well, which is which is I think 0:22:40.960 --> 0:22:44.800 perfectly appropriate. Look, the airlines, because they operate most of 0:22:44.840 --> 0:22:48.480 the airplanes and most of all big airplanes, will pay 0:22:48.600 --> 0:22:52.320 most of the seeds. But the system will be dramatically 0:22:52.359 --> 0:22:55.920 more efficient, and the consequences that the airlines are willing 0:22:55.960 --> 0:22:58.639 to take on the task of things. He's because they 0:22:58.640 --> 0:23:01.360 will be able to operate more lanes to more places 0:23:01.680 --> 0:23:08.560 with fewer delays. So with this potentially new system for 0:23:08.680 --> 0:23:13.200 air traffic control, do you believe that the actual service 0:23:13.480 --> 0:23:19.480